Bid listing is a method used in some areas of the country to prevent shopping after the fact. The concept is quite simple. Each general contractor must submit, with the bid, a list of subcontractors he or she intends to use if he or she wins the contract, along with the price for each subcontractor. My estimating career started in California, where bid listing is required on state-funded projects. I assumed it was the same everywhere. Wrong. It seems bid listing is required in 10 states: California, Connecticut, Delaware, Florida, Massachusetts, New Mexico, New York, Oregon, South Carolina and Washington. The Massachusetts law is a form of bid filing rather than bid listing, and New York requires separate contracts for certain specialty trades.
Here are some of the particulars about the way bid listing works in California. Bid forms, including the subcontractor list, must be delivered to the bid-opening location in a sealed envelope before the time specified in the bid advertisement. Bid openings are public, so anyone can attend. The sealed bids are opened and read aloud, letting everyone in attendance know who the low general contractor is and who is listed for subcontractors. The general contractor is not allowed to substitute the listed subcontractors and must offer them a contract at the listed price. There are a few instances—such as a company going out of business or not being able to bond the project—when a subcontractor can be substituted. There also are provisions for protesting a bid if you believe the low bidder has not complied with requirements. In California, the law requires any subcontract more than half of 1 percent of the total project price to be listed.
I have benefited from this process innumerable times in my career. Every project I bid where I was listed as the low bidder resulted in a contract with no bid shopping. I even got a few projects where I was not the low bidder because the low bidder could not perform. There were also a few times when a general contractor tried to get me to lower my price. A subtle reminder about the law and a mention of the state contractors licensing board solved the problem. Bid listing is not rocket science. The low bidder gets the job at the original price, and it is a system that has been working in California for more than 50 years.
As usual with anything human, the process can be corrupted. In 2006, Alan O’Shea and the Mechanical Contractors Association of New Jersey filed a complaint against the New Jersey Schools Construction Corp. (NJSCC). The plaintiffs alleged that the defendants were improperly substituting the listed subcontractors and presented close to 20 documented cases of these substitutions. Abuses included blatant bid shopping, awardees having bid-named subcontractors without the subcontractors’ knowledge and then substituting them, awardees allegedly inducing bid-named subcontractors to claim to have become too busy and then substituting them, and awardees bid-naming themselves for trade work and then substituting actual subcontractors after the awards. The final judgment required the NJSCC to “cease, desist and refrain from any conduct approving, allowing, permitting or condoning any substitution.” The ruling also required that the listed subcontractor have a signed contract before any move can be made to substitute the subcontractor. The general contractor was allowed remedies if the subcontractor could not perform.
It does not surprise me that the Associated General Contractors of America (AGC) opposes bid-shopping legislation. In 1995, the AGC, along with the American Subcontractors Association and the Associated Specialty Contractors, issued the following joint statement regarding bid shopping: “Bid shopping or bid peddling are abhorrent business practices that threaten the integrity of the competitive bidding system that serves the construction industry and the economy so well.” However, the AGC makes an argument against bid-shopping legislation. The cynical side of me finds this to be quite logical, as it is the general contractors who profit from bid shopping, while the subcontractors lose profits by being shopped. You can see the AGC’s position at www.agc.org/cs/advocacy/legislative_activity/bidshopping.
There have been efforts to make bid listing the law on federally funded projects. The latest I am aware of was when Rep. Carolyn Maloney (D-N.Y.) introduced the Construction Quality Act of 2011. Unfortunately, it has not been reintroduced in the new congress. The National Electrical Contractors Association supports legislation that protects against bid shopping and bid peddling on federal construction projects of $1 million or more. Its position can be found at www.necanet.org.